This assessment of the transport sector comes as part of a World Bank effort to update its data on the status of the infrastructure in the West Bank and Gaza Strip. After about ten years since the establishment of the Palestinian National Authority and publishing the first assessment and development strategy conducted by the Bank, there have been considerable developments on the ground. Some were positive in terms of rehabilitating roads, constructing transport facilities, and establishing institutions. However, others were negative due to the great losses in the infrastructure assets especially during the past three years of Intifadah and the resultant incursions which caused severe damage to the transport facilities, considerable restrictions on movement of people and goods, and had weakened the institutions. These changes has lead the Bank to seek to update its data and information on the status of the transport sector, as part of the infrastructure system, and the associated institutions to help formulate the Bank’s strategy for future assistance and intervention to respond to the needs of this sector. Therefore, the current status of the various transportation sub-sectors related to the roads, air, and sea transport systems, as well as public and freight transport is reviewed; and the institutional arrangements in the transport sector are presented. Such assessment would lead to the identification of the developmental objectives and sectoral priorities, along with the presentation of a suggested short-and medium-term development program, identifying the urgent and development needs in the sector. As a general background, it can be stated that due to its underdeveloped status, the transportation sector contribution to the gross domestic product (GDP) of the Palestinian territories is limited, as it accounted for 4.2% of the GDP in the West Bank (not including Jerusalem) and Gaza Strip in 2000. This is despite the observed trend of gradual increase of the share of the transport sector in the GDP, as the share was 3.4% in 1995, and 3.9% in 1997 and 5.8% of the GDP in 1998 (PCBS, 2000). Although the GDP of the Palestinian territories has been slightly improving, transportation infrastructure investment is still low compared to other developing countries (The World Bank, 2000). The consequences of road closures and travel restrictions in the West Bank and Gaza Strip in the last few years severely influenced the transport sector. The transport sector employed about 9.4% of total persons employed in the service sector in the Palestinian territories in 2002, which was the lowest employing sector among the services sectors (El-Jafari et al, 2003). The number of persons engaged in the transport sector dropped by 40% in year 2002 compared to year 2000. The share of the employed persons in the transport sector was estimated at 4% of the total labor force in the Palestinian territories in 1995, but this percentage was slightly decreasing over the years in both the West Bank and Gaza Strip (PCBS, 2001). The total number of enterprises working in land transport sector was 190 in 2002. Key performance indicators for the transport sector are presented in Annex 1, which were supplied in part by the Ministry of Planning. The existing conditions for each of the components of the transport sector, the road, air, and sea systems, the public and freight transport systems, as well as the institutional structures, are illustrated hereafter. A brief overall presentation of the rail transport system is presented in Annex 2, as there are no operating rail services. This is followed by a presentation of the objectives, sectoral priorities, and the outline of developmental program for the sector for the period 2004-2007.